Patents and Innovation Economics

I have been particularly critical of the whole notion of business method patents. Every patent is part of a business and any method patent is therefore broadly speaking a business method patent. The first patent issued in the US was a method of making potash. Since making potash is/was a business the very first patent issued in the US was a business method patent. The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.

I have also defined an invention as a human creation with an objective result, while art is a human creation with a subjective result. By objective result I mean that the invention has a repeatable result. For instance, a patent for an incandescent light bulb always produces light when the correct electrical signal is applied to the light bulb. Just because a person performs one of the steps in a claim does not make it invalid. For instance, in the patent for the method of making potash a person performed many if not all the steps. However, if the person is making a non-objective evaluation or decision as part of the method, then the process does not have a repeatable or objective result. This is why most management theories are not patentable. For instance, the popular SWOT (Strengths, Weakness, Opportunities, Threats) analysis relies on experts to define each of these points. If you put different experts into the process then you get a different result. On the other hand double entry accounting yields the same results no matter who is performing the process (as long as they apply it correctly), so it has an objective or repeatable result.

Using this standard I have found that a number of ‘business method’ patents that are invalid. These patents rely on the use of subject matter experts to evaluate something and then provide input in the middle of a process. This does not result in an objective, repeatable result. Now if these experts’ subjective opinions are at the beginning of a process, then this may still provide an objective result. For instance, if the SMEs provide a subjective 1-10 evaluation of certain Strengths in a SWOT analysis and the invention then processes these to determine the mean or rank them is some way, then this is an invention, because if the process receives the same inputs it will provide the same output, i.e, it is repeatable and objective. Alternatively, if the SMEs are provided with processed information at the end of the process, then this is an invention.